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Tuesday, January 1, 2008

Written by Antonio Sousa, Quantitative Strategies AnalystIn 2007 the CHF/JPY remained among the currency pairs with the lowest volatility in the Forex market. Assuming such price environment will continue in 2008, the CHF/JPY is our favorite pair for hedging in the week ahead with clear range-bound trade and concrete support and resistance levels.

Entry Zone: Go both long and short at the market if the price is at any level within the 97.00-100.00 rangeProtective Stop: Long stop below 103.00 and short stop above 94.00Profit Target: Long Target at 100.00 and Short Target at 97.00Profit Potential: 300 pips (excluding transaction costs and slippage)

With clear range-bound trade and concrete support and resistance levels the CHF/JPY is our primary target for hedging in the week ahead. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 (the first zone of resistance) for longs and at S1 (the first zone of support) for shorts, covering losses above R2 (the second level of resistance) or below S2 (the second level of support). Written by Antonio Sousa, Quantitative Strategies AnalystIn 2007 the CHF/JPY remained among the currency pairs with the lowest volatility in the Forex market. Assuming such price environment will continue in 2008, the CHF/JPY is our favorite pair for hedging in the week ahead with clear range-bound trade and concrete support and resistance levels. When should I use the hedging feature?

The most effective way to trade a market in which you are not sure if it will continue in the same direction or reverse is to find concrete support and resistance levels. Trading in such a price environment involves isolating currencies that are trading sideways in ranges (or channels), and then selling at the top and buying at the bottom of the channel. This allows you to pinpoint levels where significant price action will take place. Currencies that tend to trade sideways are often currencies with low interest rate differentials such as the EUR/CHF and the EUR/GBP.